The types of businesses in Chad are categorized as follows:
* Company in Chad:
- Private company limited by shares (Pte. Ltd.): A private limited company that maximizes tax deductions is a separate legal entity that offers limited liability to its members.
- Public limited company: Most publicly traded companies are large enterprises with a large number of shareholders and are usually listed on the stock exchange. These companies offer their shares to the general public.
- Public limited company limited by guarantee or surety: Public limited company limited by guarantee is a separate legal entity that does not have share capital. The company’s membership liability is limited. Most non-profit organizations prefer this business structure.
* Sole Proprietorship in Chad:
An individual enterprise is an unincorporated business structure. That is, Sole Proprietorship is not a separate legal entity. The sole proprietor has unlimited liability and no protection of personal movable property.
* Partnership (partnership, Partnership) in Chad:
- General Partnership (General Partnership): Partners have unlimited liability, that is, are personally liable for the debts of other partners. The unlimited liability of partners means that all their property can be used to settle the obligations of the partners themselves, the partnership in general, and other partners.
- Limited Partnership (LP): This business structure is an association of limited partners and general partners. The responsibility of the former is limited to their investments. Limited partners are not involved in running the business. Full partners are liable for partnership obligations with all their property. It should be noted that the Limited Partnership does not form a separate legal entity.
- Limited Liability Partnership (LLP): LLP is a separate legal entity. Partners are not personally responsible for the obligations of other partners. For the obligations of the partnership, LLP partners are liable to the extent of their contributions to the capital of the limited partnership.
* Office of a foreign company in Chad:
- Branch: Branch – is an extension of a foreign parent company and is not a separate legal entity. The liabilities cover the parent company. In the following blog articles, we will highlight the issues of registering a branch of a foreign company in more detail.
- Subsidiary: Subsidiary – Private Limited Company, which is a separate legal entity. Liability is limited to the subsidiary only and does not extend to the foreign parent company. The procedure for registering a private limited liability company with foreign legal entities as shareholders are the same as for all other limited liability companies.
- Representative Office (RO): The RO has no legal status and is a temporary administrative office designed to conduct market analysis or coordinate certain operations. The liabilities cover the foreign parent company.
Is there a specific type of business for which this or that structure is optimal?
Yes. For each specific type of business, there are optimal forms and opportunities for its promotion.
- Sole Proprietorship: If there is a small market for a product or service; if the nature of the business is simple; if the industry is not associated with particular risk; if there is the small capital required to promote the business, the company can be structured as a sole proprietorship. Examples of sole proprietorships are freelancers, babysitters, tutors, and consultants.
Warning: A sole proprietorship is often the most attractive business structure. However, it is also the most dangerous because it does not offer protection for personal movable property and assets.
- Limited Liability Partnership: The LLP form is suitable for firms that require moderate capital for development, as well as professionals who have a specific ability, talent, skill, or experience. For example, Accounting firms, law firms, architectural firms, etc.
- Private Limited Company: Small and medium-sized enterprises that are interested in long-term stability, protection of personal movable property from business liabilities, and efficient taxation tend to form a Private Limited Company. For example Retail, import/export business, construction business, restaurant business, employment office, travel agency, business management, IT consulting, financial services, educational business, etc.
How much will my business responsibility be in a sole proprietorship versus a private company or partnership in Chad?
Unfortunately, sole proprietors face unlimited business (legal) liability compared to owners of private companies or partners of limited partnerships. It is because the business structure of a sole proprietorship is an unincorporated business form and does not have a separate legal status that is different from the sole owner. There is no legal distinction between a sole proprietor and his business. In the event of a debt from the company, the creditor can obtain rights to personal movable property and funds of the sole owner.
In contrast, a business that is structured as a Chad Private Limited Company or Limited Partnership is a separate legal entity independent of its owners, shareholders, company directors, or partners. As a result, liability is limited to investments made in the company (or partnership) and personal movable property and funds are safe from creditors in the event of failure to calculate liabilities. Given the need for unlimited liability for sole proprietorships, most entrepreneurs prefer to register a Chad Private Limited Company.
